This is a good question. It is best to start with the quote, so that you can see what the monkey's paw is called in context.

Laughing, her husband took the talisman from his pocket to make the wish but with a look of alarm the Sergeant Major caught his arm.

‘If you must wish,’ he said aggressively, ‘wish for something reasonable.'

So Mr White put it back in his pocket and they all sat down to dinner. The talisman was partly forgotten for the rest of the evening as the soldier continued telling them about his exciting adventures in India.

Based on these words, the Whites call the monkey's paw a talisman. This, then, begs the question of what talisman means. Simply put, a talisman is any object that people believe has certain magical properties for a purpose, which can include luck, protection from evil, and even the ability to grant wishes. Of course, the last point is most appropriate for our context. The Sergeant Major makes this point by telling the Whites that the paw is magical.

‘Well, it’s just a bit of what you might call magic,’ said the soldier casually.

As the Whites use the paw, they realize that Sergeant Major Morris was not kidding. The paw worked to their hurt.